PAPER 1

TOPICS YOU SHOULD LOOK FOR: LEGISLATION, BUSINESS STRATEGY, BUSINESS ENVIRONMENTS, BUSINESS
SECTORS, HUMAN RESOURCE AND QUALITY OF PERFORMANCE
TOPICS QUESTION

 LEGILATION
 BUSINESS STRATEGY QUESTION 2
 BUSINESS ENVIRONMENT
 BUSINESS SECTORS
Section B
QUESTION 2
2.1. LEGILATION – 8 ACTS

Skills Development Act/SDA The main aim of this Act is to improve the skill levels of people who are already employed in the business.

Skills Development Levy/SDL It was introduced to ensure that businesses contribute to the development of skills of employees.

PDI’s Previously Disadvantaged Individuals or designated group.

SETAs SETA’s were established in order to implement and monitor the implementation of the Skills Development Act.

1. SKILL DEVELOPMENT ACT

Purpose of the Skills Development Act Positives/Advantages Negative/Disadvantages
 Redresses imbalances of the past through  Many service providers that offer training services are
 Trains employees to improve productivity in the
education and training not SAQA accredited.
workplace.
 Invests in education and training of workers  Increases the return on investment in education and  Increases cost as the process requires a large amount of
 Develops the skills of people in South Africa in training. paper work.
order to improve productivity  Promotes self-employment and black  Many businesses may not support this government
 Encourages workers to participate in learning entrepreneurship. initiative.
programmes.  Business could become globally more competitive.  Implementation of the SDA can be difficult to monitor
 Redresses imbalances of the past through
and control.
education and training
 Skills programmes may not always address training needs
 Encourages businesses to improve the skills of their
of employees.
workers
Discriminatory actions according to the SDA
 Unfair promotion of skills and development
to certain employees.
 Providing employment services for gain
without being registered as an employer.
 Furnishing false information in any
prescribed document.
Role/functions of SETAs
 Report to the Director General.
 Promote and establishes learnerships.
 Provide training materials to facilitators.
 Communicate with National Skill Authority.
 Collect levies and pays out grants as
required.
TAKE AT LEAST 4 POINTS
Penalties for non-compliance
 Businesses that do not pay the SDL may not offer
learnership from the SDA.
 A labour inspector could order the business to stop
operating should the business be found guilty of
illegal practices.
Funding of SETAs
 Donations and grants from the public
 Surplus funds from government institutions
 Funds received from rendering their services.
 Skills Development levies paid by employers e.g.
80% is distributed to the different SETA and 20% is
paid into the National Skills Fund.
 Ways in which businesses can comply with the SDA
 Employers who collect PAYE should register with SETAs.
 Businesses should register with the relevant SETAs.
 1% of an employer's payroll has to be paid over to the SETA.
 Businesses with more than 50 employees must appoint a skills
development facilitator.
Differentiate
Human Resources Development Strategy
 Develops short term and long term workforce skills.
 Increases employee participation in lifelong learning.
National Skills Development Strategy
 Improves social development through economic development.
 Improves access to training programmes.
 2. LABOUR RELATIONS ACT/LRA
Purpose of the Labour Relations Positives/Advantages Negatives/Disadvantages
 Provides a framework for labour relations  Protects the rights of businesses in labour related issues. Reduced global competitiveness due to lower productivity

between employers and employees.  Employers may not get a court interdict to stop a strike.
 Provides mechanisms such as statutory councils/ CCMA
 Establishes Labour Courts and Labour Productivity may decrease if employees are allowed to p
Appeal Courts.
 Labour disputes are settled quicker and are less expensive.
articipate in the activities of trade unions during work time.

 Promotes collective bargaining at the Employers may not dismiss employees at will, as procedures
 Promotes a healthy relationship between the employer
h and have to be followed.
workplace. employees

 Establishes the CCMA for dispute  Workplace forums can add value to businesses if it
Costs of labour increases because of legal strikes.
resolutions.
functions properly. TAKE AT LEAST 4 POINTS

 Promotes fair labour practice between the

employers and employees TAKE AT LEAST 4 POINTS

TAKE AT LEAST 4 POINTS

Discriminatory actions according to the LRA
 Preventing employees from joining trade
unions.
 Refusing the establishment of workplace
forums.
 Unfair dismissal of employees.
 Forcing employees to give up trade union
membership.
Rights of employers and employees
according to LRA
Penalties for non-compliance with the LRA
 The employer may be forced to enter into a dispute
resolution process.
 Businesses that fail to comply with this Act may risk
financial costs e.g. legal fees and fines.
 Businesses will be fined if they fail to comply with the
agreements reached during the dispute resolution process.
Rights of employers
 Form employer organisations.
 Form a bargaining council for collective bargaining
purposes.
 Dismiss employees who are engaged in an unprotected
strike
Ways in which businesses can comply with the
LRA
 Businesses must allow employees to form trade unions
 Employees should not be unfairly dismissed
 Employers should not ignore any collective agreement
 Allow the establishment of workplace forums.
Rights of employees
 Employees may join a trade union of their choice.
 Embark on legal strikes as a remedy for grievances.
 Refer unresolved workplace disputes to the CCMA.
 3 EMPLOYMENT EQUITY ACT /EEA
Positives/Advantages Negatives/Disadvantages Discriminatory actions according to the EEA

 Promotes equal opportunity and fair
treatment in the workplace.
 Impacts positively on BEE ratings for
businesses.
 Provides all employees with an equal
opportunity to be promoted in a position.
 Encourages consultation between
employer and employees.
 Businesses are sometimes pressurised to appoint  Doing HIV testing unless justified by the Labour Court
an unsuitable EE person to meet EE requirements.
 Not employing a young woman because she would want to have
children in future.
 Expensive to train someone who knows little  Denying people access to the workforce based on gender/race
about the Act. etc. and treating them unfairly
 Diversity in the workplace may lead to conflict.
 Penalties for non-compliant businesses may
be expensive for the business.

Ways in which businesses can comply with the

EEA
 Promote equal opportunities and fair
treatment

 Implement an employment equity plan.

 Ensure that affirmative action measures
promote diversity in the workplace.
  Ensure that inclusivity in the workplace
is achieved.

4. Basic Conditions of Employment Act/BCEA

Purpose of the BCEA Positives/Advantages Negative/Disadvantages
 Provides clear terms and conditions of  Developing/Drafting a formal/legal employment contract may be
 Creates a framework of acceptable employment
employment for employers and employees.
time-consuming/costly.
practices e.g., work hours, leave, etc.
 Set minimum requirements for the  No employer may force an employee to work more than 45 hours
 Promotes fair treatment of employees in business.
employment contract.
in a week. This may result in reduced productivity.
 Encourages consultation between employers and
 Advance economic development and social
employees.
justice.  Hiring cheap labour is no longer possible, so businesses cannot
 Outlines minimum requirements that form the
 Regulates the variations of basic conditions exploit workers
basis of employment contracts.
of employment.
 Work hours are specified so that the employer
 Businesses not complying with the Act, may be charged with high
cannot exploit employees.
penalties, which may affect their cash flow negatively.
TAKE AT LEAST 4 POINTS
Discriminatory actions according to the BCEA
 Refusing to accept a valid medical certificate
of a sick worker.
 Forbidding workers to discuss wages/salaries
with co-workers.
 Preventing workers from having access to
employment contracts.
Penalties businesses may face for not complying with Ways in which businesses can comply with the BCEA
the BCEA
 Businesses may be taken to the labour court for a  They must have a break of 60 minutes after five hours of work
ruling.
 Businesses should not employ children under the age of 16.
 Businesses that are found guilty of non-compliance
may face heavy fines/ penalties.  Workers must receive double if they work during public holidays
 The Director General may agree/change/cancel the
compliance order.

Provisions of the BCEA

a) Working hours
 Workers may not work for more than 45 hours in any week.
b) Overtime
 Workers must agree to work overtime.
 Overtime must be compensated as follows:
#Double the normal rate of pay for overtime worked on Sundays and public holidays.
c) Leave
Types of leave

i) Annual leave --- Workers are entitled to: 21 consecutive days’ annual leave per year/One day for every 17 days worked.

ii) Sick leave --- Workers are entitled to Six weeks paid sick leave in a period of 36 months
 iii) Maternity leave --- A pregnant employee is entitled to four consecutive months' leave.

iv) Family responsibility leave --- An employer may require reasonable proof, before granting this leave. [3 – 5 days]

v) Meal Break --- Workers must have a meal break of 60 minute after five continuous hours of work.

vi) Public holidays --- Workers must be paid for any public holidays that fall on a working day.

vii) Termination of employment --- A contract of employment may only be terminated following one week’s notice, if the worker has been employed for
six months/less.

Viii) Child and forced labour --- It’s illegal to employ a child younger than 15 years of age.
--- it is also illegal to force someone to work.

5. Compensation for Occupational Injuries & Diseases Act/COIDA

Purpose of COIDA
 Provides a comprehensive protection to employees
who injured in the course of performing their
duties.
Purpose of COIDA Negative/Disadvantages
Positives/Advantages
 Claiming processes can be time consuming.
 Promotes safety in the workplace.
 Domestic/Military workers are not covered.
 Employees do not contribute towards this fund.
 Implementation procedures required by the Act may
 Claiming processes are relatively simple
be expensive.

 Employers have to register all their workers to COIDA,

which may result in cash flow problems.
 Applies to all casual and full-time workers who
become injured/ disabled due to a workplace
accident
 It provides for the establishment of a
Compensation Board whose function is to advise
the Minister of Labour on the application.
Discriminatory actions according to COIDA
 Employers who bribe employees from
reporting the accident.
 Providing false information about previous,
serious accidents.
 Employers who do not contribute to the
Compensation fund.
 Employers who do not allow claims for injuries,
discriminates against injured employees.
 Eliminates time and costs spent on lengthy civil court
proceedings
Penalties for non-compliance with COIDA
 Businesses can be fined for refusing to lodge the claim
the Act.
 They may be forced to pay any recovery costs required
by the Compensation Fund.
 If businesses are found guilty of any misconduct, they will
have to pay large penalties/face imprisonment.
Ways in which businesses can comply with the COIDA
 Businesses should provide a healthy/safe working
environment
 Ensure that the premises/machinery is in good
working condition.
 Report all incidents causing death/injury/illness of
employees.
 Levies must be paid to the Compensation Fund.
 6. Broad Based Black Economic Employment Act/BBBEE
Purpose of BBBEE REVISED BBBEE PILLARS – MOSES

 Enable wealth to be spread more broadly across all population groups.  Management control

 Allows for the development of Codes of Good Practice.  Ownership

 Skills development
 It aims at targeting inequality in the South African economy.
 Enterprise and supplier development (ESD)
 Socio-economic development/social responsibility

Implications of the revised BBBEE pillars on businesses

a) MANAGEMENT CONTROL
Implication of MANAGEMENT CONTROL on
businesses
 Appoint black people in senior executive
positions/to management.
 Involve black people in the decision-making
processes.
 Ensure that black females are represented in
management.
TAKE AT LEAST 2 POINTS
NOTE: The word “implication” in this context
means “what businesses should do in order to
comply with this Act and what are the things
that are preventing them from implementing
this Act.
Ways in which businesses could apply
management control in the workplace
 NOTE: TAKE the ABOVE points FOR THE
APPLICATION OF MANAGEMNT CONTROL
IN THE WORKPLACE
b) Skills development C) Ownership
Implication of ownership on businesses
Implication of skills development on businesses
 Business should include black people in shareholding/
 Business must engage black employees in skills
franchises.
development initiatives.
 Encourage small black investors to invest in big
 Provide learnerships and learning programmes to black companies and share ownership.
employees.
 More opportunities are created for black people to
 Business benefits from the increased pool of skilled. become owners
TAKE AT LEAST 2 POINTS TAKE AT LEAST 2 POINTS
Ways in which businesses could apply skills Ways in which businesses could apply
ownership in the workplace
development in the workplace
 NOTE: TAKE the ABOVE points FOR THE APPLICATION OF NOTE: TAKE the ABOVE points FOR THE APPLICATION OF
SKILL DEVELOPMENT IN THE WORKPLACE OWNERSHIP IN THE WORKPLACE
d) Enterprise and supplier
development (ESD)
Implication of Enterprise and supplier
development (ESD) on businesses
 Business must create jobs as ESD promotes local
manufacturing.
 Outsource services to suppliers that are BBBEE
compliant.
 Identify black owned suppliers that are able to
supply goods and services.
e) Social responsibility
Implications of social
responsibility/socio-
economic development on businesses
 They should distribute scarce CSI resources to selected
beneficiaries in the community.
 Businesses should focus on critical areas which can affect
growth and development in the country e.g.
environmental awareness/education.
Impact of the BBBEE on businesses
Positives/Advantages
 A good BEE rating improves the image of the business
 Provides a variety of business codes to improve
employment equity.
 Encourages businesses to address the demands for
redress.
 Share prices of BBBEE compliant businesses are likely
to increase as they attract more business.

TAKE AT LEAST 2 POINTS TAKE AT LEAST 2 POINTS

Ways in which businesses could apply ESD in
the workplace

NOTE: TAKE the ABOVE points FOR THE APPLICATION

OF ESD IN THE WORKPLACE
Penalties for non-compliance with the BBBEE
Negative/Disadvantages Discriminatory actions according to BBBEE  Businesses may face imprisonment for non-compliance
 Businesses could experience large financial
and fronting practices.
implications.  Failing to implement affirmative action to meet BBBEE
responsibilities.  The penalty could be a fine of up to 10% of the
 Processes may lead to corruption/nepotism if not
 Refusing to award tenders to black suppliers who are company’s annual turnover.
monitored properly. BEE compliant.
 Investment issues can cause unhappiness amongst
existing share-holders.
 Businesses that want to do business with the
government must have their BEE status assessed
annually.
Purpose of the NCA
 Promote a fair but competitive credit market.
 Makes provision for the establishment of the
National Credit Regulator.
 Promotes the social and financial interest of
consumers.
 Ensure that consumers know what is included in
their credit contracts.
 Business licenses may not be renewed and
authorisations may not be issued
Ways in which businesses can comply with the
BBBEE
 Businesses must sell shares to black employees.
 Outsource their services to BEE compliant suppliers.
 Develop SMME’s through ESD.
 Improve the standard of living of the communities in
which they operate.
7. National Credit Act
Impact of the NCA on businesses
Negative/Disadvantages
Positives/Advantages  Businesses can no longer carry out credit marketing.
 Lower bad debts resulting in better cash flow.
 Businesses struggle to get credit such as bank loans.
 Protects businesses against non-paying consumers.
 Businesses that do not comply with the NCA may
 Authorised credit providers may attract more customers.
face legal action.
 Debt collection procedures are more complex and
expensive
 Prevent discrimination and ensure credit is  Prevents reckless lending and prevents businesses from  Increases the administration burden on credit
available to all consumers. bankruptcy. providers.

 Increases cash sales as credit can only be granted to

TAKE AT LEAST 4 POINTS TAKE AT LEAST 2 POINTS
qualifying customer.

TAKE AT LEAST 4 POINTS

Discriminatory actions according to the NCA
 Blacklisting customers without making efforts to
recover the debt
 Charging different interest rates to customers
based on gender/race
 Refusing credit to customers based on
gender/race.
Penalties/consequences for non-compliance with the
NCA
 The business may not demand payment, sue or attach
the clients salaries.
 The business may not charge any fee charges under that
specific credit agreement.
 The NCR may impose a fine on the business for non-
compliance.
Ways in which businesses can comply with the
NCA
 Offer applicants pre-agreement statements.
 Disclose all costs of loan/No hidden costs should be
charged/added
 Obtain credit records of clients before granting loans.
 Businesses should be registered with the National
Credit Regulator.

Consumer rights in terms of the NCA

Consumers have a right to:
 Fair and responsible marketing.

 Apply for credit and to be free from discrimination.

  Receive documents as required by the Act.

 Receive Information in plain and understandable language.

Note: Do NOT confuse NCA consumer rights with CONSUMER RIGHTS OF CPA

8. Consumer Protection Act

Purpose of the Consumer Protection Act Impact of the CPA on businesses Negatives/Disadvantages
 Promotes responsible consumer behaviour.  Confidential business information may become
Positives/Advantages
 Establishes national standards to protect consumers.  Businesses may be safeguarded from dishonest available to competitors.

 Establishes a National Consumer Commission (NCC) competitors.  Penalties for non-compliance may be very high.

 Establishes national standards to protect consumers.
 Promotes consumer safety by protecting them from
hazardous products/services.
 May gain consumer loyalty, if they comply with CPA.  They have to disclose more information about their
 Businesses may be protected if they are regarded as products and processes/services
consumers.  Businesses may feel unnecessarily burdened by legal
 Prevents larger businesses from undermining smaller processes.

ones.
Discriminatory actions according to the CPA Penalties for non-compliance with the NCA Ways in which businesses can comply with the
 Denying customers proper information about the  A contract may be rendered void or a fine or term of CPA

product/services.
 Treating customers differently based on gender/age.
 Charging unfair prices for the same goods and
services.
direct imprisonment may be imposed.
 Businesses may face fines or imprisonment for a period
not exceeding 10 years.
 Government agencies may conduct audits, enact fines or
even dissolve your business entirely.
 Businesses will be forced to compensate consumers in
line with the extent to which their rights have been
violated.
 Comply with the requirements regarding
promotional competitions.
 Comply with requirements regarding the display of
information on labels
 Disclose prices of all products on sale.
 Provide adequate training to staff on the CPA.

CONSUMERS RIGHTS
a) Right to choose f) Right to fair/responsible marketing
 shop around for the best prices.  Businesses should not mislead consumers on pricing, benefits of goods.

b) Right to privacy and confidentiality g) Right to accountability from suppliers

 Consumers have the right to be protected in lay-bye agreements.
 Consumers have the right to stop unwanted direct marketing.
 Businesses should honour credit vouchers and prepaid services.

c) Right to fair and honest dealings

 Suppliers may not give false information.
h) Right to fair/reasonable terms and conditions
 Businesses may not market/sell goods at unfair prices.

d) Right to disclosure and information

 Contracts and agreements should be in plain language and easy to understand.
 Businesses should display prices which are fully inclusive disclosing all costs.
 2.2. BUSINESS STRATEGY
Formulation of strategies To devise/develop a strategy.
Implementation of strategies This takes place after the formulation of the strategy and involves all the activities that are required for putting the
strategy into action.
Evaluation of strategies This takes place after the implementation of the strategy and determines whether the implemented strategy resolved
the challenge.

Industry analysis tools SWOT, Porter’s Five Forces and PESTLE analysis models are used
to analyse the challenges posed by business environments.
Suppliers Include factories/providers of goods/services that businesses would obtain/buy from in order to operate their business.

Buyers The final users of the product/services.

Competitors All other businesses selling the same/similar products/services
Substitute product or service Different products/services that satisfy the same needs of consumers and can be used to replace one another.

New Entrants New businesses that are selling the same/similar products entering the market for the first time.

Definition of a strategy
 A strategy is a long term plan of action to achieve a goal.
 A plan of action to address an opportunity or respond to a challenge.

B) The strategic management

Option 2
 Take corrective action to ensure goals/objectives are met.
 Implement a strategy, using a template such as an action plan.
  Review the vision statement.
 Analyse/Re-examine mission statement.
 Formulate a strategy such as a defensive/retrenchment strategy.
Take at least 4 points
NOTE: The steps may be in any order.

1.3 INDUSTRIAL ANALYSIS

A) SWOT ANALYSIS
B) PORTERS 5 (Triple P – TB)
C) PESTLE analysis

1.3.1 COMPILATION OF A SWOT ANALYSIS

STRENGTHS (Internal) WEAKNESSES(Internal)

 Do you have skilled employees and a  High cost infrastructure

strong customer base?  High employee turnover
 Do you provide high quality product?  Weak brand portfolio
 Do you have sufficient resources?  High debts level
 OPPORTUNITIES(External) THREATS(External)

 Market growth for the business product.
 Changing customer habits.
 Government’s incentives for ‘specific
indust
 Corporate tax may increase
 Rising pay levels.
 Intense competition.
 Increasing fuel price.
 Currency fluctuations.
 Changing technology.

NOTE: The SWOT analysis is usually assessed in the form of a scenario as indicated below:

Example of a scenario that requires learners to compile a SWOT analysis

DAVE DIGITAL SOUND (DDS)

DDS specialises in selling radios and car sound systems. They employ qualified sound engineers. The business does not have sufficient capital
to buy and sell sound systems that cater for large events. Businesses in the same industry are closing down due to ineffective marketing
campaigns. DDS is located in a high crime area.

An example of a SWOT analysis of Dave Digital Sound DDS

STRENGTHS WEAKNESSES
 DDS employs qualified sound  The business does not have sufficient capital to buy/sell
engineers. sound systems that
cater for large events.
 DDS specialises in selling radios
and car sound systems.

OPPORTUNITIES THREATS
 Businesses in the same industry are closing down due to ineffective marketing  DDS is located in a high crime area.
campaigns.
NOTE: You need to quote verbatim (as is) from the scenario, otherwise you will lose marks for writing incomplete quotes or for
writing a summary of the scenario.
1.3.2 PORTERS’ FIVE FORCES MODEL(Triple P – TB)
 Power of suppliers
 Power of buyers
 Power of competitors/Competitive rivalry
 Threat of substitution/substitutes
 Barriers of new entrants to the market
NOTE: Ensure that you are able to correctly name the above mentioned Porter’s Five Forces model to avoid losing marks.

1.3.3 APPLICATION OF PORTERS’ FIVE FORCES MODEL

1. Power of suppliers
 Assess the power of the suppliers in influencing prices

2. Power of buyers
 Buyers buying in bulk can bargain for prices in their favour

3. Power of competitors/Competitive rivalry

 If competitors have a unique product/service, then they will have greater power.

4. Threat of substitution
 If the business sells unique products it will not be threatened by substitute products.

5. Barriers of new entrants to the market

 New competitors can easily enter the market, if it takes little time to enter the market.

NOTE: The main aim of Porter’s Five Forces model is to analyse the business position in the market. This is more of a research
study done by businesses. Do not focus on recommendations as this is not form part of an analysis. You must also be
able to identify Porter’s Five forces model from given statements and scenarios.
1.3.4 PESTLE ANALYSIS
 Political factors
 Economic factors
 Social factors
 Technological factors
 Legal factors
 Environmental factors
NOTE: Ensure that you are able to name and identify the PESTLE factors from given statements/scenarios.

1.3.5 CHALLENGES POSED BY THE PESTLE FACTORS AND RECOMMENDATIONS

NOTE: You need to name the PESTLE factor, identify challenges of each factor and recommend ways businesses can deal
with the identified challenges as explained in the table below:
FACTOR CHALLENGES RECOMMENDATIONS

Political  Research recent government policies

 Trade agreements may prevent  Network and lobby with the NGOs and all consumer rights organisations.
businesses from importing some
products.

 Government policies

Economic  Inflation/Interest rates may  Consider decreasing profit margins rather than increasing product prices.
negatively impact on business.  Consider exchange rates when trading with other countries

 Fluctuations in foreign currency

may restrict import.
Social  Customers may not be able to  Sell substitute/generic products at lower prices.
afford products due high  Learn local languages/Hire employees who are well conversant with the local
unemployment. language.

 Businesses may not be conversant

with the language of their
customers.
Technological  Businesses may not keep up with of  Continuous research on the latest available technology.
the latest technology.  Train existing/new employees to use new equipment
 Businesses must be geared for online trading/e-commerce
 Employees may not be skilled to
operate new technology

 May not be able to afford online

Take at least 2 points
transactions/e-commerce.

Legal  Certain Acts may have a direct impact  Comply with all relevant legislation that may impact on businesses.
on a business, e.g. the CPA/BCEA.  Comply with the legal requirements for operating businesses, e.g. licence
 High legal costs involved in getting a  Budget for high legal establishment costs.
licence may prevent some
establishments.
 Legalities of business contracts may Take at least 2 points
limit business operations
 Environmental  Chemicals in business’ products may  Implement cost effective measures to dispose of medical waste.
be harmful to customers.
 Chemicals should be clearly indicated on labels to inform customers about possible
 Measures to dispose of business correct use of products.
waste may be expensive.

NOTE: The industrial analysis tools (SWOT, PESTLE AND PORTERS’FIVE) and business strategies form part of the strategic
management process.

2 Types of Business Strategies - DIDI

Types of
Business Description Types
Strategies
Diversification Business introduce new product 1. Concentric (Related , appealing to
related/unrelated to existing product new customers)
appealing to new/existing/group of
customers
2. Horizontal (Unrelated, appealing to
existing customers)
 3. Conglomerate (Unrelated, appealing
to group of customers)

Integration Business take over the supplier/distributor 1. Forward (Take over Distributors)
or competitor
2. Backward (Take over Suppliers)

3. Horizontal (Take over Competitors)

Defensive Business use this strategy to protect itself 1. Divestiture/Divestment (Selling

unprofitable products/assets)

2. Retrenchment (Reducing the

number of employees)

3. Liquidation (Closing down the

business)
Intensive Business use this strategy to develop and 1. Market penetration
increase market share.
2. Market Development

3. Product development

Types of Business Strategies

1 Diversification strategies
Types of Diversification strategies
A) Concentric diversification
 The business introduces new product or service that is related to existing products and which will appeal to new customers.

B) Horizontal diversification
 The business introduces products or services that are unrelated to existing products, but which may appeal to existing customers

C Conglomerate diversification
 The business introduces products or services that are unrelated to existing products which may appeal to new groups of customers.

Advantages of Diversification strategies

 Increase sales and business growth.
 Improves the business brand and image.
 Reduces the risk of relying only on one product.
2. Integration strategies
Types of Integration strategies
1. Forward integration
 The business takes over its distributors.

2. Backward integration
 The business takes over its suppliers.

3. Horizontal integration
 A business takes control of other businesses in the same industry

3. Defensive strategies
Types of Defensive strategies
1. Divestiture/ Divestment
 The business sells some assets that are no longer profitable.

2. Retrenchment
 Terminating the employment contracts of employees for operational reasons.

3. Liquidation
 Selling the entire business / close down the business in order to pay liabilities.

NOTE: You must be able to identify the types of business strategies from given scenarios/statement.

4. Intensive strategies
Types of intensive strategies
1. Market penetration
 New products enter an existing market at a low price, until it is well known to the customers and then the prices increases.

2. Market Development
 This strategy involves finding new markets and new ways to distribute product.

3. Product Development
 Businesses generate new ideas and develop new products/services

Advantages of intensive strategies

 Increase in sales and profitability.
 Regular sales to existing customers may increase.
 Eliminate competitors and dominate market prices.

Steps in evaluating a strategy

 Examine the underlying basis of a business strategy.
 Look forward and backwards into the implementation process.
 Take corrective action so that deviations may be corrected.
 Set specific dates for control and follow up.
 Decide on the desired outcome.
Take at least 4 points
NOTE: The steps can be in any order
2.3. Business Environment

Business Environment Challenges Extent of control

(Identify them from the scenario)
Micro e.g. Difficult employees Full Control
Market e.g. Suppliers, Competitors, Intermediaries, etc Little Control
Macro e.g. Any Political, Economical , Social, No Control
Technological, Legislation/legal (Acts) or
Environmental factor.

2.4. Business Sectors

Business Sectors Description Examples of industries

Primary  This business sector extracts its raw materials from the  Mining, Fishing, Agriculture
earth. Forestry, Farming

Secondary  This business sector is responsible for processing or  Manufacturing, Building and
manufacturing the raw materials into useful products. Construction, Clothing, Food
processing
Tertiary  This sector renders services to the public and the  Distribution, Transportation,
businesses. Banking, Insurance, Retail,
Entertainment, Tourism

Note: Studying these 4 topics (Legislation, Business strategies, Business Sectors & Business
Environments) will help you to be able to answer Section C – essay question i.e. Question 5.
 TOPICS YOU SHOULD LOOK FOR:
TOPICS QUESTION
 Human Resource
 Quality of Performance QUESTION 3

Section B
2.5. HUMAN RESOURCE
1.1 RECRUITMENT
Meaning of recruitment
 Recruitment is the process used by businesses to identify vacancies in the business and attract suitable candidates for it.
 Businesses may choose to use an internal or external method of recruitment depending on the nature of the vacancy.
Recruitment procedure
 Prepare a job analysis which includes job specification/ job description.
 If internal recruitment is unsuccessful, external recruitment should be considered.
 HR manager should prepare the job description in order to identify recruitment needs.
 HRM should indicate the job specification/ description to attract suitable candidates.

Job analysis
Distinction between job description and job specification
Job description Job specification
 Describes duties & responsibilities of a specific job.  Describes the minimum acceptable skills/qualifications needed for the
job.
 Written description of the job and its requirements.  Written description of specific qualifications/skills required to do the job.

Internal recruitment Refers to the use of internal sources to advertise vacancies within an organisation.

External recruitment Refers to the use of external sources to advertise vacancies within an organisation.

Internal recruitment ADVANTAGES  Current employees understand how the business operates.
 Cheaper to fill the post.

DISADVANTAGES  Employees who are not promoted may feel demotivated.

 Current employees may not bring new ideas into the business.

External recruitment ADVANTAGES  There is a larger pool of candidates to choose from.

 New candidates bring new ideas into the business.
DISADVANTAGES  Information on CV's or from references may not be reliable.
 External sources can be expensive, e.g. advertisements in newspapers

Sources of Internal recruitment Sources of external recruitment

• Internal e-mails/Intranet/web sites to staff  Recruitment agencies

• Word of mouth  Bill boards
• Notice board of the business  Printed media, e.g newspapers/flyers/magazines/posters

 Networking
 2 SELECTION
2.1 Selection procedure
Option 1
• Compile a shortlist of potential candidates identified.
• Invite shortlisted candidates for an interview.
• A written offer is made to the selected candidate.
• Inform unsuccessful applicants about the outcome of their application.
• Determine fair assessment criteria on which selection will be based.
• Sort the received documents/CVs according to the selection criteria.
(TAKE AT LEAST 4 POINTS)

2.2. Screening as part of the selection procedure

• Check application documents against the requirements of the job.

• Candidates who meet the minimum requirements are separated from others.
• Do background checks of applicants who qualify for the job.
• Prepare a shortlist of suitable candidates after screening.
3. Interview
Purpose of an interview
 To determine a candidate's suitability for the job.
 Match the information given by the applicant with the requirements of the job.
 To get more information from the applicant.
 Evaluate the skills of the applicant
 Role of the Interviewee during the interview

 Listen carefully to the questions before responding.

 Make eye contact and have good body language.
 Show confidence and have a positive attitude.
 Ask clarity seeking questions and be assertive.

Role of the interviewer when PREPARING/BEFORE the interview

 Book and prepare the venue for the interview.
 Inform all shortlisted candidates about the date and place of the interview.
 Set the interview date and ensure that all interviews take place on the same date, if possible.
 Allocate the same amount of time to interview each candidate on the program.

Role of the interviewer during the interview

 Allocate the same amount of time to each candidate.
 Introduce members of the interviewing panel to each
 Make the interviewee feel at ease.
 Do not mislead the interviewee.

Meaning of an employment contract

 Employment contract is an agreement between the employer and the employee and is legally binding.

ASPECTS/Content/Details in an employment contract

 Name/Address/Contact details of Employer.
 Job title
 Job description.
 Job specification
  Overtime.
 Termination of the contract
 Signature of both employer and employee
 Working hours, e.g. normal time / overtime
(TAKE AT LEAST 4 POINTS)

Legal requirements of the employment contract

 The employer and employee must both sign the contract.
 Employer and employee must agree to any changes to the contract.
 No party may unilaterally change aspects of the employment contract.
 The remuneration package/including benefits must be clearly indicated.
 It may not contain any requirements that are in conflict with the BCEA.
 The employment contract should include a code of conduct and code of ethics.
(TAKE AT LEAST 4 POINTS)
REASONS FOR Termination of an employment contract
 Resignation
 Dismissal
 Retrenchment
 Redundancy (when an employer no longer has work for employees and cannot fulfil the contract)
 Retirement
TWO SALARY DETERMINATION
1. PIECEMEAL 2. TIME-RELATED
 Workers are paid according to the number of products produced.  Workers are paid for the amount of time they spend at work.
 Mostly used in factories particularly in the textile/technology industries  Many private and public-sector businesses use this method.
 3. Induction – INTRODUCING NEW EMPLOYEES IN THE WORKPLACE

Purpose OF INDUCTION
 Allow new employees the opportunity to ask questions that will fear.
 Create opportunities for new employees to explore different departments.
 Communicate information about the products/services of the organisation
 Make new employees feel welcome by introducing them to their physical work space.

Benefits / Advantages OF INDUCTION

 New employees will understand rules in the business.
 Increased productivity and quality of service.
 Minimises the need for on-going training and development.
 Better focused training may be provided based on the results obtained from the induction process.
 New employees learn more about the business and understand their role in the business.
(TAKE AT LEAST 4 POINTS)

Aspects that should be included in an induction programme

 Safety regulations and rules.
 Overview of the business.
 Discussion on employee benefits.
 Tour of the business premises.

4. Placement procedure
 Outline specific responsibilities/expectations new position
 Determine the employee’s strengths/weaknesses interests by subjecting him to various psychometric tests.
 Determine the relationship between the expectations of the position and the competencies of the new employee.

Link between salary determination and the BCEA

 Sets out conditions that ensure fair labour and human resources practices.
 Businesses may use different remuneration methods to pay their employees.
 Businesses are supposed to deduct income tax (PAYE) from the employees' taxable salaries.
 Outlines legalities, such as the employment contract, which may affect salary determination.

Employee benefits
Fringe benefits
Pension  Long term savings for retirement.
Medical aid  The fund is accessed when a member or its dependent require medical attention.
Provident Fund  Long term savings for retirement.
Allowances  Amount of money paid by the employer to the employee for specific expenses to allow the employee to render a more
effective service

Impact of fringe benefits on a business

Positives/Advantages
 Improves productivity resulting in higher profitability.
 Businesses save money as benefits are tax deductible.
 Fringe benefits can be used as leverage for salary negotiations.
 It increases employee loyalty as they may be willing to go the extra mile.

Negatives/Disadvantages
 It can create conflict if allocated unfairly.
 Errors in benefit plans may lead to costly regulatory fines.
 Fringe benefits are additional costs that may result in cash flow problems.
 Businesses who cannot offer fringe benefits fail to attract skilled workers.
 The implications of the following acts on the Human Resources Function [HRF]
NB: APPLY THE POSITIVE IMPACTS OF THE ACTS
 SDA – SKILLS DEVELOPMENT
 BCEA – BASIC CODITIONS OF EMPLOYMENT ACT
 EEA – EMPLOYMENT EQUITY ACT
 LRA – LABOUR RELATIONS ACT

2.6. QUALITY OF PERFORMANCE

QUALITY
1 Definition of quality concepts

1.1 What is Quality?

 Quality refers to a good/service’s ability to satisfy a specific need.
 It is measured against specific criteria such as physical appearance, durability and sustainability.

1.2 Quality control 1.3 Quality assurance

 Checking raw to ensure that high quality standards are maintained.  Checks carried out during and after the production process.

 Includes setting targets and taking corrective measures.  Ensures that required standards have been met at every stage of the
process.

1.4 Quality management 1.5 Quality performance

  Can be used for accountability within each of the business functions
 Refer to techniques/tools used to design/ improve the quality of a
product.
 Total performance of each department measured against the specified
standards.
 Can be obtained if all departments work together towards the same
quality standards.

2. Benefits of a good management system

TV__BRIPE
T  Time and resources are used efficiently.

V  Vision/Mission may be achieved.

B  Business has a competitive advantage over its competitors.
R  Regular training will continuously improve the quality of employees' skills.
I  Increased market share and productivity.

P  Productivity increases through proper time management

E  Effective customer services are rendered, resulting in increased customer satisfaction.

(TAKE AT LEAST 5 POINTS)

3. QUALITY INDICATORS
Quality indicators of the General Management function Quality indicators of the production function
 Ensure that all departments meet their deadlines.  Utilise machines and equipment optimally.

 Develop effective strategic plans.

  Select the appropriate production system e.g. mass/batch
production.

Quality indicators of the purchasing function Quality indicators of the marketing function
 Buy raw materials in bulk at lower prices.  Increasing their market share.

 Have a thorough understanding of supply chain management.  Differentiating products in order to attract more customers.

Quality indicators of the financial function Quality indicators of the public relations function
 Analyse strategies to increase profitability.  Providing regular/positive press releases.

 Draw up accurate financial statements regularly.  Compliance with recent legislation, e.g. BEE compliant.

Quality indicators of the administration function Quality indicators of the human resources function
 Handle complaints quickly and effectively.  Good relationship with employees.

 Use modern technology efficiently.  Ensures fair and equitable selection process

NOTE: You will either be asked to explain/discuss how quality of performance can contribute to success or failure of each business
functions or explain/suggest the quality indicators of business functions.
 4. TQM ELEMENTS
Requesting clients to complete a questionnaire on the quality of services rendered
1 Total client satisfaction
Appointing a person who will be responsible for improving the quality of service.
2 Continuous improvement to processes and systems
Requesting employees to attend regular customer care courses.
3 Continuous skills development
4 Adequate financing and capacity

5 Monitoring and evaluation of quality processes

1. Total client satisfaction

Impact/Effectiveness of total client satisfaction on large businesses

Positives/Advantages
 May lead to increased profitability.
 Large businesses may be able to gain access to the global market.
 Continuously promote a positive company image.
 May lead to higher customer loyalty and businesses may be able to charge higher prices.

Negatives/Disadvantages
 Not all employees may be involved/ committed to total client satisfaction
 2. Continuous improvement to processes and systems
Impact/Effectiveness of continuous improvement to processes and systems on large businesses

Positives/Advantages
 Large businesses have more resources to check on quality performance in each unit.
 Enough capital resources are available for new equipment required for systems.
 They can afford to use the services of the quality circles to stay ahead of their competitors.

Negatives/Disadvantages
 Large scale manufacturing can complicate quality control.
 Risk of changing parts of the business that are actually working well.

Application of PDCA model/cycle in improving the quality of products

PDCA model/cycle is part of continuous improvement to processes and systems

Plan
 The business should identify the problem.

Do
 Implement the processes and systems

Check/Analyse
 Determine whether it made a difference.

Act as needed
 Continuously revise the process.

NOTE: The PDCA model forms part of the TQM element continuous improvement to processes and systems
 Quality circles
 A group of workers who do the same or similar work, who meet regularly to identify, analyse and solve work-related problems.

Roles/Importance of QUALITY CIRCLES in TQM

 Reduce costs of redundancy in the long run.
 Increase employees' morale/motivation.
 Reduce wasteful efforts in the long run
 Increase the demand for products/services of the business.
 Create harmony and high performance in the workplace.
 Build a healthy workplace relationship between the employer and employee.
(TAKE AT LEAST FOUR POINTS)

3. Continuous skills development

Impact/Effectiveness of continuous skills development on large businesses

Positives/Advantages
 Ability to afford skilled employees.
 May be able to hire qualified trainers to train employees on a regular basis.

Negatives/Disadvantages
 It may be difficult to monitor the effectiveness of training.
 De-motivates employees, if they do not receive recognition for training.
 Trained employees may leave for better jobs after they gained more skills.
 4. Adequate financing and capacity
Impact of adequate financing and capacity on large businesses

Positives/ Advantages
 They can afford to have systems in place to prevent errors in processes.
 Able to afford product research to gather information.
 Can afford to purchase quality raw materials and equipment.

Negatives/ Disadvantages
 These rapidly growing companies can consume large amounts of capital as they try to balance normal operations and
expansion.
 If the demand for company’s product increases, orders begin coming in faster than expected, and the company lacks the
capital required to fund the production of the stock to fill the orders.

5. Monitoring and evaluation of quality processes

Impact of monitoring and evaluating quality processes on large businesses

Positives/ Advantages
 May be equipped to get things done right the first time.
 Improve performance and maintain high quality standards.

Negatives/ Disadvantages
 Large businesses are often divided and the departments work in silos
 It is not viable to check quality of all the products
 6. Application of PDCA model/cycle in improving the quality of products

PDCA model/cycle is part of continuous improvement to processes and systems

Plan
 The business should identify the problem.

Do
 Implement the processes and systems

Check/Analyse
 Determine whether it made a difference.

Act as needed
 Continuously revise the process.

NOTE: The PDCA model forms part of the TQM element continuous improvement to processes and systems

Quality circles
 A group of workers who do the same or similar work, who meet regularly to identify, analyse and solve work-related problems.

Roles/Importance of QUALITY CIRCLES in TQM

 Reduce costs of redundancy in the long run.
 Increase employees' morale/motivation.
 Reduce wasteful efforts in the long run
 Increase the demand for products/services of the business.
 Create harmony and high performance in the workplace.
 Build a healthy workplace relationship between the employer and employee.
(TAKE AT LEAST FOUR POINTS)

Impact of TQM if POORLY implemented by businesses

 Decline in productivity, because of stoppages.
 High staff turnover, because of poor skills development.
 Setting unrealistic deadlines that may not be achieved.
 Business image may suffer because of poor quality goods.
 Investors might withdraw investment, if there is a decline in profits.
 Employees may not be trained enough resulting in poor quality products.
(TAKE AT LEAST FOUR POINTS)

Ways in which TQM can reduce the cost of quality

 Schedule activities to eliminate duplication of tasks.
 Work closely with suppliers to improve the quality of raw materials.
 Share responsibility for quality output amongst management and workers.
 Introduce quality circles to discuss ways of improving the quality of work.
 Improve communication about quality challenges, so that everyone can learn from experience.
 Train employees at all levels, so that everyone understands their role in quality management.

(TAKE AT LEAST FOUR POINTS)

Note: Studying these 2 topics (HUMAN RESOURCE and QUALITY OF PERFORMANCE) will help you to be
able to answer Section C – essay question i.e. Question 6.